Insiders are selling Nvidia stock! Should I?

Nvidia stock’s made plenty of investors richer over the past 18 months, including many insiders. So why are some of those insiders selling?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Nvidia (NASDAQ:NVDA) stock has pushed higher than many investors could have imagined. A year after my first investment in the GPU (graphics processing unit) maker, I’m up nearly 200%. It can be really tempting to cash in.

However, it seems people working at Nvidia are selling some of their stock, including president Jensen (Jen-Hsun) Huang. So what does this mean?

Created with Highcharts 11.4.3Nvidia PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Nvidia insiders sell

Huang has sold 480,000 shares in July alone, generating just short of $60m. This is on top of the $169 million worth of stock he sold last month — his most ever.

Should you invest £1,000 in Rolls-Royce right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Rolls-Royce made the list?

See the 6 stocks

Moreover, executives at Nvidia have sold more than $700m of stock this year. Once again, this is a record for Nvidia.

Among the significant sales is Colette Kress, EVP and CFO at Nvidia. She sold 200,000 shares in late June generating more than £24m in a single transaction.

Several other EVPs, including Ajay Puri, sold stock in June.

Should we be concerned?

I think there are several thinks to note before we start to worry. Firstly, while these might be ‘record’ sales in value terms, it’s worth recognising this likely reflects the surging share price.

If insiders had sold exactly the same number of shares two years ago (accounting for the share split), these transactions collectively would be worth $70m. That’s just 10% of the value of the share sales this year.

Secondly, insiders can sell stock for a host of personal reasons, including tax planning and making major purchases. For context, the stock’s up 3,004% over five years and 29,000% over 10 years. The stock’s probably turned many long-term employees with once-modest holdings into multi-millionaires.

There’s also the matter of concentration risk — having too much of your money in one investment.

Billionaire investor Warren Buffett reportedly convinced Bill Gates to sell Microsoft shares in an effort to diversify his portfolio. While this is generally a very wise thing to do, it’s interesting to note that Gates would be a trillionaire if he’d kept his Microsoft shares!

The bottom line on Nvidia stock

Nvidia is the kingpin of the artificial intelligence (AI) revolution, with its GPUs offering parallel processing power crucial for training complex AI models.

Nvidia’s stock’s expensive by near-term metrics, trading at 46.6x forward earnings. Despite this, it’s among the cheapest of the ‘Magnificent Seven’ tech giants by the price-to-earnings-to-growth ratio, which stands at 1.42. This is testament to the staggered earnings growth projections.

Growth is expected to continue strongly throughout the decade, driven by increasing investment from hyperscalers in AI and cloud infrastructure.

Its leadership in AI technology and its huge R&D investments positions it well to capitalise on these trends, ensuring sustained demand for its advanced GPUs and related tech.

Personally, I see no reason to sell my Nvidia shares.

Should you invest £1,000 in Rolls-Royce right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Rolls-Royce made the list?

See the 6 stocks

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James Fox has positions in Nvidia. The Motley Fool UK has recommended Nvidia. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Up 30% in weeks, does the BAE Systems share price still offer value?

The BAE Systems share price has been on a tear over the past couple of months. This writer sees limited…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Hunting for shares to buy as the market trembles? Remember this!

After a choppy week in global stock markets, our writer goes back to basics in his hunt for bargain shares…

Read more »

Investing Articles

3 simple principles to help build wealth in an ISA

As a new tax year opens up new ISA allowances for many investors, our writer shares a trio of things…

Read more »

Investing Articles

US trade tariffs: what they could mean for UK shares like Ashtead, Compass Group, and Experian

US trade tariffs continue to rock global markets, and the UK is no exception. Our writer considers how a new…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Dividend Shares

The Trump slump has smashed these FTSE 100 shares!

After a rough week for US and UK shares, investors have been shaken. But now these FTSE 100 stocks have…

Read more »

Investing Articles

£10,000 invested in Rolls-Royce shares 5 years ago is now worth…

Rolls-Royce shares have been on fire since April 2020. Part of this is the result of pandemic restrictions lifting, but…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

£10,000 invested in Tesla stock at its peak in 2024 is now worth…

Over the last few months, Tesla stock has lost nearly half its value. Here, Edward Sheldon explores a few takeaways…

Read more »

Investing Articles

Is the S&P 500 heading for an epic stock market crash?

Our writer shares his thoughts on a very crazy time for the S&P 500 and the wider stock market. How…

Read more »